Briefing book - Internal Trade - 2021

[ * ] An asterisk appears where sensitive information has been removed in accordance with the Access to Information Act and Privacy Act.

Part A: Welcome to Internal Trade

1. Overview - Internal Trade

Internal trade is an essential element of the Canadian economy. It can support economic competitiveness by creating jobs, helping businesses expand, enhancing consumer choice, and increasing Canada’s overall economic growth.

Since the Canada Free Trade Agreement (CFTA) came into force in 2017, achievements have been made on the file, but progress has been incremental. Part A.2 includes a list of actions to date.

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Stakeholders continue to push federal, provincial, territorial (FPT) governments to do more to reduce barriers and strengthen trade in key economic sectors, particularly given the challenges from the COVID-19 pandemic on the Canadian economy and the growing global sentiment of protectionism. A key list of internal trade stakeholders is attached at Part A.3.

There are limited unilateral federal levers to advance the internal trade file. Collaboration with PT partners is critical to ensuring meaningful progress and successfully advancing trade liberalization, both through the existing Agreement and new commitments.

Canadian Free Trade Agreement (CFTA)

The CFTA, which replaced the 1995 Agreement on Internal Trade (AIT), includes all FPT governments. The CFTA covers nearly every sector of the economy, providing a comprehensive set of trade rules to facilitate trade in goods, services, investment and labour mobility within Canada.

The CFTA:

• commits FPT governments to a set of rules aimed at creating an open and strong domestic market;
• reduces and eliminates barriers to trade in services, goods, investment, and labour mobility;
• covers all sectors of the economy unless exceptions are included;
• seeks to align domestic trade commitments with those in Canada’s international agreements, such as the Canada-EU Comprehensive Economic and Trade Agreement (CETA); and,
• contains comprehensive dispute resolution processes to allow a CFTA Party or a person to initiate a dispute against another CFTA Party.

The CFTA is a consensus-based agreement and requires the support of all 14 FPT ministers of the Committee on Internal Trade (CIT) to amend or operationalize elements of the Agreement.

The CFTA also established a number of forward-looking working groups and committees, including the Trade in Alcoholic Beverages Working Group, Regulatory Reconciliation and Cooperation Table and the Northern Foods Working Group.

Your role as Minister for Internal Trade

As Minister responsible for Internal Trade, you are responsible for advocating for improved trade between PTs, are a member of the FPT CIT Ministerial table, and oversee the implementation of Canada’s commitments under the CFTA.

As the federal CIT Minister, engaging with PTs, as well as other key federal ministers (e.g., Innovation, Science and Economic Development, Finance Canada, Treasury Board) is critical to advancing the file and addressing elements of the ongoing priority areas outlined in Part B.

Stakeholders and industry often look to the federal CIT Minister for support and leadership to address trade barriers and accelerate action.

Committee on Internal Trade (CIT)

The CIT, comprised of all FPT ministers responsible for internal trade, is responsible for supervising the implementation of the CFTA, including providing oversight over a number of CFTA working groups, assisting in the resolution of disputes, approving the annual operating budget of the Internal Trade Secretariat (ITS), and considering any other matter that may affect the operation of the CFTA.

The ITS, an FPT intergovernmental affairs body located in Winnipeg, Manitoba, provides administrative and operational support to the CFTA and CIT Ministers.

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The federal objectives under the CIT are to:

• contribute as a member of the CIT in overseeing the implementation of the CFTA and jointly provide direction to FPT officials;
• continue to push PTs to be bold and ambitious in reducing barriers to interprovincial trade; and,
• push PTs to bring forward concrete and meaningful outcomes to the CIT.

The CIT meets annually. The last CIT meeting was hosted virtually in September 2020. British Columbia is the 2021 CIT chair, and Yukon will become chair in 2022. The chair rotates annually between all 14 parties, including the federal government, as set out in the CFTA. The federal government last chaired the CIT in 2013.

The next meeting of the CIT is expected to be held virtually on December 13, 2021.

In advance of next CIT meeting, additional information, including items for decision and federal positions, will be provided in advance.

Regulatory Reconciliation and Cooperation Table (RCT)

The RCT is a committee of senior-level FPT officials that provides a forum for governments to resolve existing barriers to trade resulting from differing regulations and to collaborate on the development of common regulatory measures for emerging sectors or issues. First Ministers appoint senior officials. For the Government of Canada, this position is held by the Assistant Deputy Minister of Regulatory Affairs at Treasury Board Secretariat.

Each FPT government can add items for reconciliation or cooperation on the RCT work plan. Working groups are created for each item and are responsible for developing a Reconciliation Agreement (RA). The RA details how the barrier to trade will be addressed, names of participating governments, and the timelines for its implementation. Parties may opt out of these negotiations if they wish.

To date, 10 RAs have been completed, and 20 items remain on the work plan.

The federal objectives are to encourage the RCT to:

• seek consensus among PTs;
• seek stakeholder views on regulatory reconciliation and cooperation opportunities and priorities;
• coordinate stakeholder engagement activities;
• push for greater transparency and openness in communicating with stakeholders; and,
• be ambitious in pursuing regulatory reconciliation and cooperation in a timely manner.

2. Actions to date

The federal government has demonstrated leadership in advancing the internal trade file by removing regulatory and other barriers in areas such as transportation (e.g., trucking), food, alcohol and construction (i.e., National Building Codes).

Fall Economic Statement 2018 announced the Government’s intent to work with PT partners to accelerate action to remove regulatory and other barriers in four areas:

• harmonizing requirements for the trucking industry;
• harmonizing food regulations and inspection rules across the country;
• aligning regulations in the construction sector, including building codes across Canada; and,
• facilitating greater trade in alcohol between PTs.

At the First Ministers Meeting in December 2018, First Ministers agreed to accelerate the work to address domestic barriers to trade, and committed to:

• develop harmonized standards in the trucking sector, including wide base tires, electronic logging devices, and size and weight restrictions;
• develop clearer rules for organic products and eliminate the duplication of food oversight and safety;
• develop ways to facilitate the sale of alcoholic beverages; and,
• reduce the number of exceptions and strengthen the dispute resolution provisions.

The federal government has taken several additional actions to enhance internal trade, including:

• repeal of any federal restrictions on the sale of alcohol in the Importation of Intoxicating Liquors Act, entered into force in June 2019;
• National Building Codes were made available for free in November 2018;
• the Safe Food for Canadians Act and Regulations took effect in January 2019, which enables regulatory harmonization in the agri-food sector;
• amendments to Canada’s vodka compositional standard took effect in June 2019;
• amendments to the federal Energy Efficiency Regulations for household appliances took effect in June 2019; and,
• consultations to amend the requirements for Product of Canada labels were completed in summer 2019, and are awaiting approval of the proposed recommendations.

FPT collaboration also led to significant achievements, including:

• FPT Ministers of Labour agreed to harmonize requirements for certain occupational health and safety equipment (e.g., hearing protection) and for first-aid kits;
• Internal Trade Ministers agreed at the May 2019 CIT meeting to assess the feasibility of a direct-to-consumer system for alcoholic beverages, undertake a technical update of Party-Specific Exceptions in the CFTA, and introduce an administrative process into the CFTA that allows FPT governments to update its commitments for purposes of trade liberalization.

The Government of Canada actively participated on the various CFTA working groups throughout 2020 and 2021, to work towards advancing the trade in alcohol file and negotiations on both financial services and non-medical cannabis.

Through Budget 2021, the federal government committed to allocate $21 million to strengthen FPT capacity to reduce internal trade barriers within Canada in order to:

• enhance the capacity of the CFTA Internal Trade Secretariat;
• create a repository of open and accessible pan-Canadian internal trade data to identify barriers, including licensing and professional certification requirements, to allow FPT governments to better work together to reduce them; and,
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In August 2021, the Government of Canada also enhanced its commitments in the CFTA by making:

• amendments to several federal exceptions in the CFTA, which signaled the government’s continued commitment to expand its obligations in the CFTA; and,
• commitments to PTs to continue to review remaining federal exceptions to further reduce as appropriate.

3. Key internal trade stakeholders

4. Provincial and territorial contacts

Provincial and territorial - Committee on Internal Trade Ministers

Part B: Your first 100 days

1. Early decision points and priorities for implementation

Context

There are several key internal trade work streams underway that represent a comprehensive 2021 strategic plan to advance internal trade. The roadmap outlining these work streams is attached in Part B.2. Elements of these work streams require critical decisions in order to accelerate action, including the implementation of Budget 2021 commitments on internal trade.

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To ensure that the federal government is well positioned in the coming months on the file to advance its own suite of initiatives (e.g., Budget 2021), PCO-IGA will work closely with your office to advance these policy files. A proposed briefing plan is attached in Part B.3.

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Implement Budget 2021 commitments

Objective: [ * ]

Through Budget 2021, the Government announced a suite of actions on internal trade to build positive momentum on the file.

Budget 2021 proposed to allocate $21 million over three years to reduce trade barriers in Canada, helping build a more prosperous economy. Specifically, the Budget included the following commitments:

1. Work with provincial and territorial partners to enhance the capacity of the Internal Trade Secretariat that supports the Canadian Free Trade Agreement in order to accelerate the reduction of trade barriers within Canada.
2. Advance work with willing partners towards creating a repository of open and accessible pan-Canadian internal trade data to identify barriers, including licensing and professional certification requirements, so that we can work together to reduce them.
3. Pursue internal trade objectives through new or renewed discretionary federal transfers to provinces and territories.

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To implement this process, PCO-IGA will work closely with your office to confirm on overall approach.

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Objective: [ * ]

Each FPT government is allowed to maintain exclusions (known as Party-Specific Exceptions) to obligations in the Agreement to protect their sensitive policy space (e.g., alcohol, energy). These exceptions are often criticised by governments and stakeholders. Specifically, federal exceptions are often viewed as being overly broad and restrictive despite being important in maintaining existing FPT agreements in key sectors (e.g., oil and gas accords), Canada’s international trade agreements, and national security considerations.

In August 2021, the Government of Canada notified the Internal Trade Secretariat of the removal and narrowing of several federal exceptions in the CFTA. [ * ] it demonstrated the federal government’s desire to enhance its level of ambition on the file.

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Objective: [ * ]

[ * ] A more detailed briefing will follow under a separate cover.

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Objective: [ * ]

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In order to implement federal commitments under the CFTA, [ * ]

2. Internal Trade roadmap

3. Key policy files: Follow-up briefings

There are a number of key policy files carried over from the previous internal trade mandate and new initiatives announced as part Budget 2021 and include important intergovernmental dimensions. Federal-provincial-territorial considerations can have significant repercussions in the development and implementation of policy and programmatic initiatives.

You will be briefed on the background, status and intergovernmental implications of these policy files separately.

Proposed briefings:

• Committee on Internal Trade: December 2021 meeting
  • Federal objectives
• Internal trade landscape
  • Current state of play
  • Key policy files
• Budget 2021 commitments
  • Key decision points
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Part C: Provincial and territorial landscape

Provinces and territories (PTs) continue to work towards strengthening internal trade within Canada and removing barriers that impact the economy as a whole, although the level of ambition varies between jurisdictions.

Context

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1. Provincial and territorial landscape

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2. Provincial and territorial map

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